This Is America Today, Part I

A true story: A fifty-ish woman I know was diagnosed with breast cancer. Dutifully, she and her husband contacted their insurance company to start the process of paying for her medical bills.

But lo and behold, the insurance company started dragging its feet—then tried to claim the woman’s breast cancer was a “pre-existing condition”.

That she had breasts in fact was a “pre-existing condition”—a “pre-existing condition” she had had since she was fourteen.

But the cancer? That was brand new.

The woman and her husband started the usual, insurance company-designated complaint process—which they quickly realized was a deliberate rigamarole, designed to get them spinning their wheels without receiving any money from the insurance company.

So they did the smart thing: They contacted lawyers. Not “a” lawyer, but a team of lawyers—four in fact, including a partner in a name law firm in her city.

This squad of lawyers had a morning meeting with the insurance company people.

In less than a single business day, the insurance company started paying up. In the two years since this little “episode”, as the cancer stricken woman calls it, she and her husband haven’t had a single problem with their insurance company.

This is America today.

The insurance company didn’t act im-morally so much as a-morally: They made the cold-hearted calculation that it wasn’t worth their while to pay off the woman’s justifiable claim—until she showed up with a squad of lawyers. Then the insurance company made another cold-hearted calculation: That it was cheaper to pay off her legitimate claim than to fight her lawyers.

So they paid: Not because they were contractually obliged to—as they were—or because it was the right thing to do—as it was. No: They paid off her claims because it was cheaper than trying to wriggle out of their obligation.

This is America today.

What If The Government Takes Over Wikipedia?

A quick post.

As most people know, Wikipedia will go offline on Wednesday—in protest over the Stop Online Piracy Act (SOPA) and the Protect Intellectual Property Act (PIPA). The Financial Times has a brief but fairly comprehensive overview of what’s going on here.

A lot of people online—myself included—are against both SOPA and PIPA. And for one, I fully support what Wikipedia is trying to do: Shut itself down—the sixth most visited website on the planet—and thereby get those 234 million daily users to read its statement opposing SOPA and PIPA.

Knowing the editorial judiciousness of Jimmy Wales and the Wikipedia team, I have no doubt that, one, their opposition has been carefully thought through; and two, this unprecedented step of shutting down the site is extraordinarily serious—and thus emphasizes how seriously Wales and his team take the measures in SOPA and PIPA.

In other words, Wales and his team aren’t fucking around—this is a big deal.

But I couldn’t help wondering: The U.S. government must also recognize that this isn’t a temperamental teenager throwing hissy-fit—Wikipedia is seriously respected in the online community. Wikipedia’s shut-down is a big black eye to SOPA and PIPA—and to the people who are pushing it, especially Barack Obama’s White House.

So what if the U.S. government were to decide to take over Wikipedia? Prevent it from going offline? With the excuse that they’re taking it over and keeping it online “for the good of the American people”?

Let’s face it, Wikipedia is incredibly important to the Internet. Most of us go to Wikipedia first, if a quick Google search doesn’t get us the info that we need. And whenever we want to get the skinny on something complicated, Wikipedia is often the only place we go to.

Thus we are all particularly dependent on Wikipedia: It shapes our knowledge base much more profoundly than we either realize, or would probably like to admit. The fact that it doesn’t advertise, and depends instead on donations alone, gives it even more credibility, and to our eyes makes it that much more trustworthy.

But Wikipedia is an incredibly small, incredibly fragile operation. It’s yearly budget is less than $20 million per year—nothing, when compared to, say, the bailout of Citi.

Just as it declared Citi, BofA, Goldman and JPMorgan “Systemically Important Financial Institutions”, what’s to stop the U.S. government from declaring Wikipedia a “Systemically Important Website”?

And rather than throwing money at them, what’s to stop the government from revoking Wikipedia’s non-profit status? Declaring it a for-profit—and then using the IRS, say, to take it over? Or better yet, prevent it from shutting down by delaring it “Educationally Essential Website”—and putting it under the aegis of the Education Department? Take it over “for the good of the country”? And then maybe start shading and editing the various Wikipedia entries in order to give a “more balanced version of events”?

“Paranoid”, you say? Well, it’s not paranoia if they’re really coming after you.

Famously, Senator Joe Lieberman brought out security, terrorism, and all the other bugaboos when he argued for the U.S. government to have the ability to shut down the Internet—infamously concluding with the line that, “China, the government, can disconnect its Internet—we need to have that here too.”

State control of the Internet: That’s what Sen. Lieberman meant when he said, We need to have that here too. There’s really no other way to interpret what he said.

What if Lieberman or someone of his delicate sensibilities were to say something like, “Wikipedia is a Systemically Important Website. So we need to be able to take it over—for the protection of the American people and to stop them from being ‘misinformed’.”

Don’t think it can happen? Paranoid, am I?

Then why are Jimmy Wales and his team at Wikipedia shutting themselves down for a day? For kicks?

Or because they think that this is real?

Join Me As I Say: No.

When I was about 15 or 16, I read Solzhenitsyn’s The Gulag Archipelago. The book is a history of the Soviet concentration camp system between 1918 and 1956, based on the testimony of actual prison inmates, of which Solzhenitsyn was one—and it had a profound effect on me, both politically and as a future writer.

But most of all, it taught me something crucial: What is legal is not necessarily the same as what is just.

Because you see, the Gulag system of forced-labor and concentration camps was completely legal: Proper laws had been properly passed, which allowed innocent people to be shipped off to their doom in a properly legal process. Even before the Nazis came up with the Wannsee Protocol, Lenin and his Soviets had perfected the idea of using the law to rape justice and the rights of human beings.

We today look at such abuses of the law as perversions typical of authoritarian and totalitarian regimes—

—but what about in a democracy? What about in our democracy? What about in America?

Recently, the United States’ Congress duly and democratically passed the National Defense Authorization Act (NDAA), which President Obama duly and democratically signed into law.

The NDAA makes it legal for the executive branch to unilaterally declare anyone, including an American citizen, a terrorist suspect. And on merely the strength of this suspicion—not an act, not even a plan, but merely on a suspicion—an accused person can be “detained” indefinitely.

So imagine this: Read more »

A Run On The Global Banking System—How Close Are We?

Nine weeks after its bankruptcy, the general public still hasn’t quite realized the implications of the MF Global scandal.

Once he looks down, then he’ll begin to fall.

My own sense is, this is the first tremor of the earthquake that’s coming to the global financial system. And how the central banks and financial regulators treated the “Systemically Important Financial Institutions” that had exposure to MF Global—to the detriment of the ordinary, blameless customer who got royally ripped off in its bankruptcy—is both the template of how the next financial crisis will be handled, and an accelerator that will make the next crisis happen that much sooner.

So first off, what happened with MF Global?

Simple: It went bankrupt—because it made bad bets on European sovereign debt, by way of leveraging positions 100-to-1. Yeah, I know: Stupid. Anyway, they went bankrupt—which in and of itself is no big deal. It’s not as if it’s the first time in history that a brokerage firm has gone bust. But to me, the big deal in this case was the way the bankruptcy was handled.

Now there are several extremely serious aspects to the MF Global case: Specifically, how their customers were shut out of their brokerage accounts for over a week following the bankruptcy, which made it impossible for those customers to sell out of their positions, and thus caused them to lose serious money; and of course how MF Global was more adept than Mandrake the Magician at making money disappear—about $1 billion, in fact, which still hasn’t turned up. These are quite serious issues which merit prolonged discussion, investigation, prosecution, and ultimately jailtime.

But for now, I want to discuss one narrow aspect of the MF Global bankruptcy: How authorities (mis)handled the bankruptcy—either willfully or out of incompetence—which allowed customer’s money to be stolen so as to make JPMorgan whole.

From this one issue, it seems clear to me that we can infer what will happen when the next financial crisis hits in the nearterm future.

Read more »

The European Central Bank Loses Its Virginity

And it means more than is apparent.

This post is adapted from analysis which appeared in The Strategic Planning Group.

Mario, relax . . .

So yesterday, the European Central Bank (ECB) doled out €489 ($639) billion in loans to the European banking sector.

Why’d they do it? ‘Cause Europe’s banks are broke: That is, if all the crap they collectively hold on their books were marked to market, their liabilities would be greater than their assets. American banks shouldn’t smirk: The only reason they aren’t declared bankrupt for the same reason is because of the suspension of FASB 157 back in March 2009.

The ECB lent out the €489 billion against any and all collateral the European banks would put up. In exchange for this collateral—no matter how damaged—the banks got 1% loans, which is not merely free money but essentially subsidized money: Eurozone inflation is around 3%, and except for German and Dutch debt, all sovereign bonds are yielding more than 3%. Thus a 1%-interest loan from the ECB is like being paid to take out a loan—and who wouldn’t want that deal?

Ordinarily, no bank wants to be seen to be taking money from the central bank, because it makes the bank look weak, and therefore hurts its reputation on the markets. But in this case, 523 banks—count ‘em, 523—took the ECB money: Which proves both how fragile the situation really is, and how generalized that fragility really is. European banks no longer care what it looks like, as survival has trumped appearances.

Be that as it may, the banks took the money. And like their American counterparts, who took the Federal Reserve’s $7.7 trillion of free money and used it to buy Treasury bonds, the European banks are likely to plow this ECB largesse into sovereign debt: Thus they will make risk-free profits. And what bank doesn’t want that.

This was a major move, by the way: The ECB—after protesting for months that it was not and would never be the lender of last resort—has become . . . the lender of last resort: It has finally lost its virginity. Not only that, the ECB—like every recently deflowered naïf—will find it next to impossible to say “No” the next time the European banks come looking for nookie.

There are three aspects to this situation that I want to look at here:

Read more »

About Gold: Don’t Panic!!!

It’s momentary—and it’s because of the euro.

This post is adapted from analysis which appeared last week in The Strategic Planning Group.

For those of us watching the gold markets—that is, those of us anticipating the collapse of the euro and the eventual collapse of the dollar—the last week has been a scary ride: Gold has fallen over 8.6%, from a high of $1,730 on December 7 to $1,580 on December 14.

WTF???, I can practically hear everyone say. The fundamentals would point to gold being a safe haven play—it should not be falling: If anything, it ought to be rising.

But a fall of 8.6%? In a week?

The first thing that pops into my head is, Don’t Panic!!

The second thing that pops into my head is, This is to be expected—and is only a temporary pullback.

Let’s take the second notion first: The reason the fall in gold is to be expected—and the reason it might well fall further—is because of the euro.

Read more »

Why Gay Marriage Doesn’t Make Sense—and Isn’t Fair

I took a lot of slack recently, for saying I’m against gay rights. In a 2,000 word piece, my disagreement with the concept of gay rights was a passing reference of all of three words—exactly three words.

A slogan on a t-shirt
is not a reasoned argument.

The extent of my “homophobic rant”?

“Gay rights—no.”

From the reaction of a surprisingly large number of people, you’d think I’d called for every homosexual to be rounded up and put into Black Marias with no tailpipes. And since I have identified myself philosophically as a conservative Catholic (though not spiritually, as I do not believe in God), a lot of people took my objection to gay rights to mean that I was some close-minded Bible-thumping bigot who hates all gays for the mere fact of being gay.

Amazing, what people will infer out of thin air.

I don’t have an issue with homosexuals or homosexuality. My own sense—which seems to be confirmed by science—is that homosexuality is an inborn predisposition, no different than, say, alcoholism or left-handedness: There isn’t much a person born with the characteristic can do about it.

Those with an inborn predisposition—any inborn predisposition—can choose to not carry out the urgings of their predisposition: That is, they can choose to repress their predisposition. Alcoholics go to AA meetings precisely so as to repress the urge of their predisposition to drink themselves to death; my grandmother (born a lefty) had her left hand tied to her belt when she was taught to write in the 1930’s.

But though people can repress their predisposition—whatsoever that predisposition might be, be it positive, negative or neutral—they can’t choose to have or not to have their particular predisposition. As Lady Gaga says, they were born this way.

As an inborn predisposition which I do not share, I am indifferent to homosexuality, to the same degree that I am indifferent to left-handedness or alcoholism: Two other traits which I do not share. (Parenthetically, I’ve always suspected that those who belligerently “hate the gays” are secretly afraid that they themselves might be gay; but that’s for another post.) And just as I think that people who are left-handed or alcoholic should not be discriminated against, I think it’s wrong to discriminate against homosexuals qua homosexuals.

But what I am saying is that homosexuals should not receive certain privileges that society has deemed befit some citizens and not others.

Like the benefits of marriage.

Our society grants married people certain rights and privileges—certain benefits—which homosexual couples believe they ought to receive as well. Read more »